Vision: Looking Back to Look Forward

Most people know that the transitional month of January is named after Janus, the Roman god of beginnings and endings who looked both backwards and forwards at the same time. But how many of us know about the power of the Janus Effect? I certainly didn’t, until reading a brilliant book, The Leadership Challenge, by James Kouzes and Barry Posner. In it, they recount the Janus Effect research that can help nonprofits. Corporate CEOs were divided into two groups and asked to “think of things that might (or will) happen to you in the future” and “think of things that have happened to you in the past.” In answering the questions participants were to list 10 events, attaching dates to each event. But the order of questions was switched. Group A was asked to think of the future first; Group B to think of the past first. When comparing results, CEOs in Group B – who first thought of the past – consistently envisioned twice as far into the future than those in Group A who looked at the future first. Since reading The Leadership Challenge many years ago, I’ve enjoying tapping into the power of the Janus Effect in various ways that you can use, too. It doesn’t have to be elaborate. In fact, here’s how our staff at the National Council of Nonprofits recently invoked the power of looking to the past to sharpen our view of the future.

Like many nonprofits, the National Council of Nonprofits reacts to meet the needs in its local community. Unlike most nonprofits, however, our “community” stretches from coast-to-coast and border-to-border, so there is a high premium placed on being nimble. But without a crystal ball to see what the nonprofit community will need in 2014, our staff recently activated the Janus Effect by reflecting on our network’s accomplishments in 2013. We did so trusting that, as Kouzes and Posner explain, “When we gaze first into our past, we elongate our future. We also enrich our future and give it detail as we recall the richness of our past experiences … and gain a greater appreciation for how long it can take to fulfill aspirations.” By looking at the recent past, we saw ongoing trends continuing into and natural arcs emerging in 2014. Here’s what we saw from 2013 that inspired insights about what’s ahead in 2014:

Nonprofits finally paid their indirect costs: For the last couple of years the National Council of Nonprofits’ network has worked closely with the White House Office of Management and Budget (OMB) on what has been described as a “once-in-a-generation” overhaul of federal policies concerning government grant and contracts with nonprofits. In late December, OMB released its Final Guidance that requires federal agencies, states, and local governments receiving federal funding to reimburse a nonprofit’s indirect costs using the nonprofit’s already-existing federally negotiated indirect cost rate. If a negotiated rate does not yet exist, then nonprofits are empowered to request negotiating a rate or elect the default rate of 10 percent of their modified total direct costs. This recognition by the federal government that a nonprofit’s indirect costs (sometimes called overhead or administrative costs) are legitimate expenses that need to be reimbursed for the organization to be sustainable and effective is a landmark decision. Beyond the obvious financial benefits and the new respect for work by nonprofits, it should prompt people to stop using the artificial metric of lower overhead as a false proxy for nonprofit effectiveness that winds up starving charitable nonprofits. (See “The Overhead Myth.”)

Looking forward, even beyond 2014, OMB’s new Guidance will change the game significantly for charitable nonprofits that receive funding from governments. It provides much-needed clarity and direction. Still, to secure the benefits of the new rules, nonprofits and foundations must do much, immediately. For instance, during the next year as federal agencies revise their regulations and train staff to implement the changes, many nonprofits will need to learn how to properly allocate costs so they can negotiate for the full indirect costs rather than settle for the default rate of 10 percent. Nonprofits also must secure training on how to negotiate for their own indirect cost rates at the federal as well as state and local levels. In short, immediate efforts are needed to ensure that the recognition gained through the OMB Guidance is turned into the reality of reimbursement.

Protecting nonprofit resources and the charitable giving incentive: By tracking trends across state borders, the National Council of Nonprofits’ network identifies how policies and practices at all levels of government – local, state, and federal – threaten or support the work of community-based nonprofits. When necessary, our network mobilizes to resist efforts by state and local governments to divert funds away from nonprofit missions and work in communities. In 2013 we monitored state capitals across the country, connecting policy dots so that charitable nonprofits could see trends, craft solutions, and mobilize for action. Our nationwide network of nonprofits successfully coordinated resistance to efforts to take away or limit charitable giving incentives in multiple states. (See “The Lab Results Are in on Tax Reform,” The Hill, and “Tax Reform Lessons Learned from State Experiments,” Huffington Post.) We also raised awareness about the dangers of implementing new taxes, fees, or payments in lieu of taxes (PILOTs).

Looking forward, in 2014 we see more attempts by state and local governments – which themselves have not fully recovered from the Great Recession – to view charitable nonprofits as sources of revenue. The experiences of 2013, however, show that charitable nonprofits can turn challenges from governments into opportunities to promote partnership and problem solving that benefit the people nonprofits serve. For more about what we see and what guides our policy work, see our 2014 Public Policy Agenda.

Stealth shift of public burdens onto the backs of charitable nonprofits: As the Nonprofit Finance Fund reported in 2013, demands on nonprofit missions continued the steady increase that began before the Great Recession, even as the ability of charitable nonprofits to meet those needs was threatened by arbitrary sequestration cuts, federal government shutdowns, and expiring food assistance (all of which created new needs with more people turning to nonprofits for help). While cutting spending on public programs, governments did not cut the underlying needs, which often increased. Indeed, some government officials openly told constituents to instead “seek help from local charities and churches.” To help the media and others recognize the severity of these challenges and the shifting of public burdens onto nonprofits, the National Council of Nonprofits distilled information from front-line nonprofits about the devastating effects of these shifts, launched a website, www.GiveVoice.org, created infographics, and sounded alarm bells in articles such as “Business as Usual: A Tale of Two Sectors” (Huffington Post) and “What Is the Biggest Threat to Nonprofit Missions That Nobody Is Talking About?” (National Center for Family Philanthropy).

Looking forward, in 2014 we anticipate that with governments still in austerity mode, more attempts to shift government financial responsibilities to nonprofits will occur and that income inequality will become more pronounced, both in human need and as a broader public policy issue.

Looking forward into 2014, given the continued seriousness of these challenges, our network will continue to focus on efforts to reform government/nonprofit contracting, and we’d love to hear from you about your first-hand experiences with this multi-faceted issue.

Looking ahead, we will continue to provide up-to-date information on a great many topics and keep on the look-out for trends to watch that affect all charitable nonprofits.

Of course, none of the network’s accomplishments in 2013 would have been possible without our fabulous network of state associations of nonprofits, Nonprofit Allies, State Policy Allies, and collaborating partners … and the financial support of our very important individual, corporate, and foundation allies. They collectively make the vision of the future much brighter. Together, we all can make a difference in 2014 – from coast-to-coast and border-to-border. Thank you!